Profit-Taking Risks and Geopolitical Uncertainty Cloud the Short-Term Outlook
US 10-year Treasury yields continued to decline, falling to 4.847%, further supporting weakness in the US Dollar, which slipped toward the 101.240 level. In theory, lower bond yields reduce the opportunity cost of holding gold, providing support for the precious metal after Treasury yields above 5% had previously kept gold prices under sustained pressure.
On the economic front, ADP employment data came in stronger than expected at 86K, compared with the forecast of 65K, although the figure remained slightly below the previous reading of 90K.
ADP Chief Economist Nela Richardson said companies of various sizes increased hiring last month. The report also indicated that workers changing jobs were attracted by a combination of bonuses, overtime, longer working hours, and higher base salaries. The latest employment growth marked the fastest pace since March 2024.
Meanwhile, the ISM Services PMI came in at 54.5, below expectations of 54.8 and down from the previous month's 54.9.
With mixed economic data, gold initially showed relatively limited movement. However, the subsequent sharp rally was triggered by comments from Senate Democratic Leader Chuck Schumer, who said Democrats would push President Donald Trump to end the war with Iran. His remarks boosted hopes of a potential agreement that could ease inflationary pressures and eventually reduce the need for further Fed rate hikes.
Schumer's Remarks Ease Energy Prices and Support Gold
Senate Democratic Leader Chuck Schumer stated that his party would work to force Trump to end the war. Schumer said Democrats would take action to bring the conflict to an end, claiming that several Republican senators also supported the effort.
He added that Americans did not want the conflict, questioned why it had happened, and wanted it to end as soon as possible.
The comments immediately helped calm the oil market, pushing WTI crude prices below $90 per barrel.
Lower oil prices raised hopes that inflationary pressures could gradually ease, potentially reducing the Federal Reserve's need to raise interest rates further. This development is generally positive for gold, as lower interest rate expectations reduce the opportunity cost of holding non-yielding bullion.
However, the possibility of a December rate hike remains on the table. For now, market sentiment is being driven more by expectations of an end to the war than by any concrete diplomatic agreement.
Geopolitical Risks Remain in Focus
Despite improving market sentiment, geopolitical risks have not disappeared.
US Defense Secretary Pete Hegseth is reportedly facing the possibility of dismissal. With Democrats gaining greater political control, discussions surrounding potential proceedings against Hegseth could place additional pressure on his position.
Several media reports have also indicated that Trump has sought advice from his advisers on whether to retain or dismiss Hegseth.
Meanwhile, markets are still waiting to see whether Trump will continue pursuing military action against Iran or abandon the plan altogether. US military forces remain on alert, including three aircraft carriers positioned in waters surrounding the conflict region.
Several media outlets have reported that Trump reiterated he had no immediate plans to attack Iran following the US midterm elections.
Nevertheless, markets remain cautious about the possibility of an unexpected military operation without prior warning. Such a development could emerge at any time, including over the weekend, when liquidity conditions may be thinner.
Given these uncertainties, traders should remain flexible and be prepared to adjust their trading strategies according to changing geopolitical developments.
Two Potential Trading Scenarios for Gold
1. No War or Further Military Escalation
A peaceful scenario would be considered a more stable environment for financial markets.
Potential market reaction:
Gold could resume its upward momentum, with a breakout above $4,150 opening the way toward $4,217–$4,227 and potentially $4,254.
A potential peace agreement could provide additional support, allowing gold to break above $4,300.
Trading strategy: Maintain the BUY scenario while bullish momentum remains intact.
2. The US Launches an Attack on Iran and the Conflict Escalates
An unexpected military order from Trump could trigger a sudden reversal in market sentiment.
Potential market reaction:
Gold could reverse sharply and quickly fall below the psychological $4,000 level.
Initial downside targets could include $3,920 and the $3,870–$3,886 support zone.
A further break below $3,870 could expose $3,800–$3,820, with an extended downside target of $3,700–$3,720 if the conflict continues through the weekend.
Trading strategy: Switch to SELL if military escalation triggers a confirmed bearish reversal.
From the economic data perspective, attention will gradually shift toward Friday's US Nonfarm Payrolls (NFP) report. However, the dominant market theme at this stage remains whether the Iran war will escalate or move toward an end.
Gold Technical Analysis
The daily gold candlestick closed bearish, resembling a hanging man pattern, after the previous recovery stalled around the $3,970–$3,971 resistance zone for the second consecutive session.
From a technical perspective, this formation suggests that downside risks remain present. However, the psychological support zone between $3,870 and $3,886 has continued to hold, preventing a deeper correction so far.
As a result, bearish risks would become more dominant if gold breaks below $3,870. Conversely, bullish momentum could strengthen if prices successfully break above the $3,970–$3,971 resistance zone.
Geopolitical uncertainty has not completely disappeared, while the results of the US midterm elections are still undergoing the vote-counting process.
Nevertheless, Trump's statement that there are no immediate plans for an attack on Iran has helped calm financial markets. This has also created a relatively positive environment for gold, as concerns over potential energy-driven inflation have eased for now.
For the time being, the market's primary focus remains on geopolitical developments rather than direct safe-haven demand.
Gold Outlook: Gold is approaching the $4,200 region, supported by falling Treasury yields, a weaker US Dollar, and easing oil prices. However, overbought conditions, potential profit-taking, and lingering geopolitical risks could create significant volatility. Traders should closely monitor the $4,150 breakout level, the $3,970–$3,971 resistance zone, and the critical $3,870 support level while remaining prepared for sudden changes in market sentiment.